Water UK has today published a Frontier report assessing productivity improvements in the English water sector in the period since the industry’s privatisation almost 30 years ago.
Water UK is a membership organisation which represents and works with the major water and wastewater service providers in England, Scotland, Wales and Northern Ireland. It commissioned Frontier, in collaboration with Professor David Saal of Loughborough University, to quantify the productivity gains achieved by the water and sewerage companies in England since privatisation in 1989. In order to calculate Total Factor Productivity (TFP), the report used an index-based approach to measure growth in industry outputs relative to growth in inputs, adjusted for changes in quality.
The analysis found that between 1994 and 2017, productivity grew by 2.1% per year on average, implying total cumulative growth of 64%. Productivity grew quickly immediately after privatisation, followed by a period of intermediate growth in the early 2000s, with a significant drop in growth since 2008 following the Global Financial Crisis (GFC).
The report also compared its estimates of productivity in the water and sewerage sector with estimates for other relevant comparator sectors from the EU KLEMS database. It found that the sector materially outperformed comparators in the decades after privatisation leading up to the GFC in 2008. While growth in the water sector has since slowed, this was also a trend observed in comparator sectors and in the UK economy as a whole.
Frontier advises clients on a range of topics affecting the water sector, including quantitative modelling, regulation and productivity growth.
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